PharMerica agrees to be sold to KKR, Walgreens for $1.4B; then go private

Screenshot of PharMerica’s website

PharMerica shares spiked Wednesday morning after the company announced that it had agreed to be acquired for $1.4 billion and go private.

The deal calls for a newly formed company, controlled by the global investment firm KKR and, as a minority owner, Walgreens Boots Alliance, to pay stockholders of the Louisville-based pharmaceutical services company $29.25 a share, which was 16.7 percent higher than Tuesday’s closing price.

Shares had closed at $25.05 Tuesday, but opened Wednesday morning at $28.85, up 15.2 percent. More than three million shares had changed hands before 10 a.m. That’s roughly 20 times the normal daily average trading volume.

The companies said the all-cash transaction was valued at about $1.4 billion “including the assumption or repayment of debt.” As of July 28, PharMerica had 31.1 million shares outstanding, meaning the value of the stock portion of the transaction is about $910 million.

PharMerica provides pharmacy management services for institutional health care providers including hospitals, people receiving in-home care and skilled nursing and assisted living facilities. The company operates 96 institutional pharmacies, 20 specialty home infusion pharmacies and five specialty oncology pharmacies in 45 states and annually delivers 30 million prescriptions to nursing facilities. It employs about 6,000.

Chief Executive Officer Greg Weishar said in a press release that the decision to be acquired followed a review of “strategic alternatives.”

“This transaction will deliver immediate and compelling value to all PharMerica shareholders, as well as substantial benefits to our clients and employees,” Weishar said. “With the support of KKR and a strategic partner in Walgreens Boots Alliance, PharMerica will have additional resources and expertise to advance and grow the business. We look forward to the completion of the transaction and to achieving the meaningful benefits of this complementary relationship.”

PharMerica shareholders still have to approve the deal, but the company expects the sale to be finalized early next year.

KKR is publicly traded and based in New York City. It has $137.6 billion in assets under management as of March 31. Its portfolio includes 108 companies that generate more than $160 billion in annual revenue and employ about 1 million.

Screenshot from KKR’s website.

KKR could not be reached Wednesday to talk about the deal’s impact on employment and other aspects of the Louisville operations.

PharMerica on Wednesday also posted a second-quarter net profit of $4.7 million, up 88 percent from a year earlier.

The company said that organic growth and acquisitions last year and this year helped improve quarterly revenue, at $592 million, by $72.4 million, 13.9 percent. The cost of goods sold rose $64.6 million, or 14.8 percent. Gross profit improved $7.8 million, or 9.5 percent.

Expenses for selling, administration and other areas increased by about $8 million, but were offset partially by lower charges related to acquisitions, litigation and restructuring, which fell by about $4 million.

PharMerica was created in 2007 through the merger of Kindred Healthcare’s pharmacy business with a subsidiary of AmerisourceBergen.

This story was updated with more information about second-quarter results.